What happenedPresident Bush and Treasury Secretary Henry Paulson raised the possibility that a federal rescue package for GM and Chrysler could require some sort of “orderly” bankruptcy. The automakers, their unions, and their dealers and parts suppliers say any sort of bankruptcy would be fatal. Starting Friday, Chrysler is closing all its North American plants for at least 30 days, and GM and Ford are mothballing several plants as well. (AP in Yahoo! Finance)

What the commentators saidAn “orderly bankruptcy” makes the most sense of all the options on the table, said Megan McArdle in The Atlantic. “We have a very, very good system for taking distressed companies back to profitability.” And if the government signs on to be “lender of last resort” and guarantee vehicle warranties, bankruptcy might just work.

Some surveys show that U.S. buyers “wouldn’t bolt” from a government-backed, bankrupt GM or Chrysler, said David Kiley in BusinessWeek, but my instinct says “all but the die-hard Big Three supporters” would jump to Ford or “the imports.” For Chapter 11 to succeed, the White House, the Obama team, and the Big Three “would have to coordinate an extraordinary marketing, PR, and promotion campaign”—and I doubt they have it in them.

No, a well-structured prearranged bankruptcy could work on its own merits, said Tom Walsh in the Detroit Free Press. “It could cost a bundle—way more than the $14 billion of loans needed to meet short-term GM and Chrysler cash needs”—but what are the alternatives? “Write a couple checks” and “punt the long-term Detroit dilemma” to Obama, or an economically disastrous failure—both of which Bush said he wants to avoid.

“Washington’s failures are far more significant to the economy than Detroit’s,” said Philip Howard in The Wall Street Journal, so “how about restructuring Washington” while we’re at it? If Congress “cut ‘legacy obligations’” (how about the farm bill?), streamlined management in the bureaucracy, and made “products that the public wants” (like a cleaned-up legal code), we’d all be better off.